After several weeks of consolidation, January crude oil closed in a position to breakout to the upside, as talks between Iran and six other nations to curb Tehran’s nuclear program broke down for the second time in a month. A fresh round of talks began on November 20, however, talks seemed to reach an impasse after a senior Iranian envoy suggested that momentum from the previous round of talks had been slowed.
The U.S., Britain, China, France, Germany and Russia had offered a gradual easing of the sanctions against Iran that have crippled its economy for several years. A senior Iranian official suggested momentum from the previous talks had slowed, meaning that a first-step agreement still had to be hammered out. After the talks stalled, a U.S. official said it would be “very hard” to get a nuclear agreement with Iran this week.
Brent crude oil rallied on the news, increasing the spread between Brent and crude oil. The widening of this spread is the main reason behind the recent rise in crude oil. Although the normal supply/demand fundamentals remain bearish, crude is being underpinned by the rise in Brent. This upside movement may continue indefinitely since there doesn’t seem to be any urgency to reach a deal over the near-term.
Crude oil traders faced volatile conditions this week, but survived because of the rally in Brent crude. On Wednesday, prices rose early in the session after a smaller-than-expected build in crude inventories…